Success stories

Public Private Partnerships (PPP) to the Philippines

Trends and opportunities

The market

Historically, spending on infrastructure in the Philippines has been low (around three per cent of gross domestic product (GDP) over the past decade in comparison to a five per cent average for other South-East Asian nations). However, infrastructure has been highlighted by the new administration of President Rodrigo Duterte has a key priority and 5.4 per cent of GDP has earmarked for public investments (PHP860.7 billion / A$23 billion) in the proposed 2017 budget (Source: ANZ Research, October 2016). Greater private sector participation is encouraged in order to implement this ambitious infrastructure development plan. The new President also announced a review of the PPP mechanism, particularly Policy Enhancements, Process Improvements and Development of a Policy Framework.

The PPP Centre is the Philippine Government agency responsible for facilitating, coordinating and monitoring the PPP program. As of September 2016, about 53 projects were in the pipeline worth over A$3.3 billion (Php5934.85 billion) (Source: Public-private partnership Center, September 2016). Fifteen projects have now been awarded, eleven are under procurement, one is due to be rolled out, and a further 25 are at different stages of development. The projects cover the spectrum of public infrastructure needs, from roads and rail to hospitals, airports and water. A detailed list of the status of PPP projects can be accessed through the PPP Center website.

The PPP Centre has oversight of the Project Development and Monitoring Facility (PDMF). A revolving fund amounting to US$69.47 million (A$91.3 million) supports pre-feasibility studies, feasibility studies and other specialised transaction advisory services to improve the bankability of PPP projects. The fund is supported by the Australian Government and by the Asian Development Bank. A panel of transaction advisers from 22 international consulting firms provides the necessary advisory services to implementing agencies to ensure the viability and bankability of projects.

In May 2014, the PPP Centre and Infrastructure New South Wales (INSW) signed a Memorandum of Understanding (MoU) for a twinning arrangement to further increase the capacity of the PPP Centre to coordinate and monitor the country’s PPP program and to learn from the experience of Infrastructure NSW in the implementation of PPP projects. It involves peer-to-peer exchanges, technical advice and knowledge sharing lectures/workshops, roundtable discussions and dialogues and site visits to successful PPP projects in NSW. Austrade is working with the PPP Centre on a planned visit to INSW in early 2017.

Opportunities

Australia is recognised as a world leader in PPP project development. Its expertise is acknowledged not only in engineering work but also in financial, legal and economic advisory services. There are two stages in the PPP project cycle which offer opportunities for Australian companies. The first is in project preparation and the second in project delivery.

Australian firms can partner with local companies to provide specialised services such as:

pre-feasibility and feasibility study preparation

legal, financial, and economic studies

the preparation of tender documents.

The Philippines has strict nationality requirements enshrined in the constitution which affect the delivery of projects. For example, the construction, operation and maintenance of public infrastructure is restricted to companies that have at least 60 per cent Filipino ownership. For PPP project delivery, the most viable channel for Australian participation is in partnership with a major Philippine conglomerate.

Another avenue for Australian companies wishing to become involved in PPP projects is to be hired directly by local government agencies under Philippine procurement laws. In this case, their role is generally to provide advisory and consultancy services to facilitate the preparation of PPP projects.

Competitive environment

In most cases, local conglomerates will assume the leading role in bidding for PPP projects. However, some will look towards creating international partnerships as a way to give them a competitive edge during the tendering process. The diversity of projects being planned through the PPP Centre means a range of international providers from various backgrounds are also actively pursuing partnerships with local conglomerates.

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